Stepping out of the limit order book: Empirical evidence from the EBS FX market

Abstract

Most limit orders exit the market as cancellations or revisions without a transaction. Using the EBS dataset, we can measure how long an individual limit order remains in
the foreign exchange (FX) market. Thus, we use the measured lifetimes of canceled limit orders and find that post-order-placement changes in market price and limit order
book depth affect cancellations, consistent with optimal behaviors that consider both order placement and order exit. FX dealers cancel their limit orders faster as the depth increases at better quotes. When market prices move away from their submitted quotes, patient dealers exhibit greater forbearance for their worsened position.

Item Type:

MPRA Paper

Original Title:

Stepping out of the limit order book: Empirical evidence from the EBS FX market